Thursday, March 31, 2011

Notes to Self : The Intellectual Capital - By Thomas Stewart

Notes from reading the book Intellecutal Capital by Thomas Stewart
  • This book is a useful guide to the issues of identifyinf, capturing and using knowledge to improve competitive advantage.
  • Intellectual Capital can be broken down into three areas Human Capital, Customer Capital and Structural Capital.
  • Human Capital is the knowledge that resides within the head of employees and is relevant to the purpose of the organization.
  • Human Capital is formed and deployed, writes Stewart, 'When more time and talent of the people who work in a company is devoted to activities that result in innovation'.
  • Human Capital can grow in two ways: 'When the organization uses more of what people know, and when people know more stuff that is useful to the organization'.
  • Unleashing the human capital resident in the organization requires 'minimizing mindless tasks, meaningless paperwork, and unproductive infighting'.
  • Customer Capital is the value of a company's ongoing relationships with the people or organizations to which it sells.
  • Indicators of customer capital include market share, customer retention and defection rates, and profit per customer.
  • Customer capital is probably - and startlingly the worst managed of all intangible assets'.
  • Structural Capital is the knowledge retained within the organization that becomes company property.
  • Stewart calls this ' knowledge that doesn't go home at night'.
  • Structural capital 'belongs to the organization as a whole. It can be reproduced and shared'. Example includes technologies, inventions, publications and business processes.
  • Understanding what intellectual capital amounts to is only part of the story for organizations.
  • We get real value from being able to capture and deploy Intellectual Capital.
  • Stewart offers the following ten principles for managing intellectual capital
    • Companies don't own human and customer capital. Only by recognizing the shared nature of these assets can a company manage and profit from them.
    • To create human capital it can use, a company needs to foster team work, communities of practice, and other social forms of learning.
    • Organizations wealth is created around skills and talents that are proprietary and scarce. To manage and develop human capital, companies must recognize unsentimentally that people with these talents are assets to invest in. Others are costs to be minimized.
    • Structural assets (those intangible assets the company owns) are the easiest to manage, but those that customers care about least.
    • Move from amassing knowledge just-in-case to having information that customers need ready-to-hand, and that which they might need within reasonable reach.
    • Information and Knowledge can and should substitute for expensive physical and financial assets.
    • Knowledge work is custom work
    • Every company should re-analyze the value chain of the industry that it participates in to see what information is more crucial.
    • Focus on the flow of information, not the flow of materials.
    • Human, structural and customer capital work together. It is not enough to invest in people, systems and customer separately.

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